The Labour Party has been characterised by the Tories and the right-win press as hating business and anyone who earns a living in the private sector. Naturally this is untrue, but it is a powerful idea given the millions people who people who work for for-profit entities. A while ago I argued that Labour’s future electoral success doesn’t mean moderating their policies, but articulating how socialist principles can be of benefit to businesses. Although this has a philosophical contradiction, insofar as collective ownership of the means of production and capitalism are inherently opposed, in the short term a left-wing case involving business will be required. It appears that John McDonnell and Jeremy Corbyn are that case, and it isn’t such that it will alienate businesspeople.
In a speech to the Federation of Small Business, Jeremy Corbyn announced a “war on late payment”. According to the Labour leader, large businesses without or delay payment of £26 billion every year, which forces approximately 50,000 small companies out of business. The justification is not a radical socialist principle, but simple logic: if a small business hasn’t received payment, they cannot reinvest that money in new technology or additional staff. And given the fact that many small businesses have poor access to finance, this would unlock a huge amount of economic activity as well as alleviate some of the stress that small business-owners face every day.
Further, Corbyn announced that a future Labour government would require companies in receipt of public sector contracts to pay their suppliers within 30 days, thus using the power of the state to change business practices. This is exactly the kind of thing that Labour needs to focus on. It’s all well and good railing against the dodgy practices of big business, but what wins votes is putting a coherent alternative and tackling this specific kind of abuse is something that will affect almost every small business in the country.
Corbyn also said that Labour would also reduce some regulations on small businesses with turnover of less than £83,000 per year. Specifically, Corbyn said that quarterly tax reporting for these enterprises would be changed on the grounds that they are needlessly burdensome. The reason that this policy makes sense is that, as well as actually being helpful, it allows the Labour leader to make the political point about big businesses avoiding tax. By framing the policy as reducing bureaucracy for small businesses and freeing up Treasury resources to go after TNCs avoiding tax, Corbyn can frame Labour as a party standing up ordinary people.
The final aspect of Labour’s new approach announced today was that a network of state-owned, regional investment banks would be established to provide small businesses with finance. If you ask small business-owners what their biggest lasting problem has been since the Great Recession, I would argue that the overwhelming majority would say poor access to finance. Businesses need finance like a computer needs electricity, a business without finance will not be able to survive very long.
This is an important point because the case can be made that the Tories, as a result of their ideological position, are unfit to change this situation. The Tories don’t believe in the state interfering in the market, and as such they have to rely on the banks decided of their own volition to increase lending. Labour don’t have that ideological handicap and can work directly to improve business efficiency and general economic activity.
By tackling late payment one stream of finance is freed up, but getting loans from banks is also vitally important, and the benefit of these investment banks being state-run is that they wouldn’t need to turn a profit. Because these banks are only trying to cover their costs, the interest rates will be lower and as these institutions will not having a casino gambling department, they should be better insulated from financial problems in the City.
These policies are another arm of Labour’s increasingly fleshed out economic vision for the country, but in order to convince the electorate of their economic competence, the party will need to demonstrate how their other policies will benefit small businesses. Luckily for Labour, I’m going to do that now.
Renationalising the railways will allow the state to increase investment in the network, creating a better service for passengers, and this will inevitably result in more government contracts for private companies. Because this investment will make the service quality more reliable, passengers will be less stressed and thus more productive when at work. Also, if governance of the railways was an equal partnership between the state and the trade unions- something akin to the model of corporate governance seen in Germany- there would be fewer strikes and people would not be late for work, thus also boosting productivity. And if the state reduced fares, which I believe is possible given that state-run railways in other countries are much cheaper, commuters would have more disposable income to spend in shops.
Another policy promoted by Jeremy Corbyn is a massive investment in social housing. In his speech to the Federation of Small Business, Corbyn spoke, indirectly, about supply chain job creation. If, as Corbyn says, Labour will build around 200,000 houses every year, the number of jobs this will create in the construction industry will be a vital boost for the sector. I would argue that many more houses will be needed to successfully deal with the housing crisis, and providing councils with low interest loans from state-run investment banks would be a way of kick-starting this house building revolution. If the state decides to massively increase house building, construction companies will have long-term contracts, and this will give workers security in employment as well as certainty that will boost consumer spending.
Thirdly, and finally, turning to minimum wage into an actual living wage will increase the velocity of money in the economy. When rich people receive a tax cut or see a rise in their income, they won’t necessarily spend it because they already have enough to get by. If, however, working class people have their wages increased, they will spend that money on repaying debts, home improvements, and/or consumer products. Here’s an example. A worker with monthly income of £1,000 with expenses of £1,100 is slowly accruing debt. If this worker gets a £100 pay rise, they stop accruing debt, which will reduce their expenses over time as their debt diminishes, and their additional money will not sit in a bank account somewhere. Although small businesses may have increased outgoings by this pay rise, their order books will be boosted, thus giving the extra money to provide this increase.
If Labour are going to win the 2020 election they need to appeal to wide section of the electorate. Policies like those announced by Jeremy Corbyn today do this as they can be supported by workers and small business-owners. By re-establishing economic security for workers and small businesses, Labour can win votes in areas that are currently leaning towards the Conservatives. But this can only be the case if these policies are effectively marketed. The Labour Party never gets a fair hearing from the press so proposing policies that are hard to argue with are an important way of getting the message out.
But the other way is by coming up with a sophisticated online strategy to bypass traditional media sources. Speaking to people directly without the right-wing framing found in much of print media is a the quickest way to convey policy positions. Labour needs to get a series of policy proposals made into short little clips so that they can go viral and drive the conversation online. Although this will not, in and of itself, guarantee electoral success, it will force the Tories to address Labour’s policies directly.